Updated on 5th of May 2009 to take account of the fact that I have since verified that the explanation about OECD tables being ‘problematic’ was provided to Sarah by a press officer in the Dept. of Finance. I have also modified a section which may have implied that the other claims about Ireland’s generous social welfare payments which appeared in newspapers after Sarah’s column was printed were based on Sarah’s original claim. I did not say that this was the case. However, I wanted to stress that the unsubstantiated statement is not unique to one commentator but instead is repeated regularly and no doubt will be again. All suggestions that Sarah was trying to deflect or hide anything in her response have been removed as they could be seen as an attempt to discredit her. This was not the intention of the piece and I am happy to remove them.

Sarah Carey, who was asked by Michael Taft in an open letter published in ILR last month to substantiate her assertion that Ireland had the ‘most generous social welfare payments in the EU’, has been unable to do so. Michael’s open letter specifically asked what information she was basing her claim on so as to substantiate it and if she couldn’t, to print a correction in her Irish Times column.

Instead she has given us a response in an email which does not explain adequately why she would make such a statement. In it she says that she was originally informed by the Dept. of Finance that Ireland had the most generous social welfare payments in the EU and that she had asked them for more information after Michael’s challenge. What they provided her with was not information which argued why Ireland’s rates where so much better than those in other EU countries, but a statement explaining why the OECD tables used by Michael were ‘problematic’. This is not the real information we were looking for, which should be the only basis for such a claim. Instead it is the opinion of someone from the Dept of Finance. Not only that, the explanation itself is inaccurate and misleading, as Michael’s response indicates. In her original email she suggested that her claim came from ‘a statement and figures’ in a Dept of Finance briefing document yet no details from this were provided in the reponse. Without those details it is impossible for us to determine what the statement was based on, or to determine if the Department of Finance’s information is correct. We also do not know how the Department’s statement was phrased. So, we were provided with a response, but when you take the erroneous explanation away we are left with nothing.

The reason why I would like to know whether the information which was attibuted to the Department of Finance is correct or not is because this claim will appear again. It might be in another column by another writer, or given out as part of a press release from IBEC, or inserted into a piece in a Sunday newspaper which is provided as a guide to the December budget. When it does I would like to have established whether there is actual information behind such an assertion.  It should not be necessary to challenge these statements again and again when there is Michael’s post online and a Sunday Tribune article completely contradicting it.

When I initially contacted her on the 23rd of March to ask for either a response which I could publish or a correction, she said she wanted to respond. Yet it took three weeks and many more emails to finally get this – the reason given: her source in the Dept of Finance was on honeymoon and she was busy on budget week so couldn’t respond sooner. In the meantime the point we had challenged was being aired repeatedly through the media and in political debates in the run-up to the supplementary budget in April. These included statements made by IBEC spokesperson Turlough O’Sullivan, the triad of Irish Stockbrokers Davy, NCB and Goodbody, Nicola Cooke of The Sunday Business Post, Daniel McConnell of the Sunday Independent and even Brian Lenihan during his Budget Speech earlier this month.

If Sarah had responded in a more timely way and had allowed us to verify that the statement was false (and provided a correction), it would not have been as easy for this statement to get repeated as widely and as authoritatively as it has. When she initially indicated that she wanted to respond, she mentioned that she thought it was unfair of us to focus on one phrase which did not have much to do with the main argument of the article. Our point was that the level of social welfare payments had everything to do with the current debate about what measures should be taken in the supplementary budget in order to deal with the size of our financial deficit. Not only that, it also provided support for those who were already calling for substantial cuts in social welfare payments, something that would not only have a specific impact on the broader economy but would directly affect the lives of increasing numbers of workers who were now relying on those payments.

Although we did not get the substantiation Sarah said she could provide, we did get the mildest of concessions:

“Let’s say I acknowledge that perhaps we are not the MOST generous.”

What is important, however, is that after the delay, the emails, the explanation from the official in the Dept of Finance that the OECD tables didn’t tell the whole story she finally admits that her original statement was false. But it’s not a full admission, because she does not admit that the statement within the context of the piece was false, only that it was one misplaced word. This is not nearly good enough.

To put some flesh on the bones of this story let’s go back to the original article. In her March 18^th Irish Times column Sarah Carey was talking about the economy, taxation and those low earners who had, over the previous 10 years or so, been taken out of the tax net. While arguing that most people in Ireland do not want to have to pay tax for the services they enjoy, she said:

‘When asked who should pay tax so that there’s enough money to fund the most generous social welfare payments in the EU, we are back to - you’ve guessed it - the tax exiles.’ (Emphasis mine)

It was the highlighted statement which forced Michael to write the open letter, because the information he had available to him, the OECD Wages and Benefits table, suggested that it simply wasn’t true.

According to the OECD data, a single person claiming social welfare in Ireland received payments that were 29 percent below the average of other EU-15 countries. ”Even poorer countries such as Portugal and Spain” he argued, “make higher payments” Also, payments to the “single unemployed makes up only 34 percent of net take-home pay, again the 3rd worst in the EU-15 tables.”

In the case of payments to a married couple with two children Irish recipients fairs better, appearing slightly above average, at mid-table. Unfortunately, he says “we don’t manage to pay the average replacement rate as pertains in the other countries.  An Irish couple with two children will only receive 52 percent of their net take-home pay.  In other EU-15 countries the average is 59 percent.”

When Power Purchasing Parities (PPP), which are used to even out living standards in the countries being compared, the ranking changes: for a single person, to 38 percent below the average, while for a married couple with two children earning the average industrial wage the level of social welfare payments “falls below the average in the other EU-15 countries”.

Michael then asked for the source of her claim that Ireland had the most generous social welfare payments in the EU, and to either substantiate it or provide a correction. Once Michael’s letter was published in the Irish Left Review I contacted Sarah to see if she wanted to respond.

She replied quickly saying that she would, but had to get her next column out of the way first. In a follow up email on the 26^th of March when I contacted her again, she said that she was trying to check the figures with the Dept of Finance as they had originally given them to her. In another mail, on the 30^th of March, I suggested that perhaps her contacts at the Dept of Finance may have been echoing the point made by Brian Cowen on the 29^th of March. In a specially convened press conference he mentioned that successive Fianna Fail led governments over the last 10 years were responsible for increasing employment and making improvements to social welfare:

“We did increase our social welfare payments well beyond the cost of living. We did a lot of good things.”

However, she said they had been clear; they were the most ‘generous’ in the EU, not most ‘improved’.

On the 2^nd of April, I got another mail from Sarah telling me why there had been a delay from her contact in the Dept. of Finance. As it happened on that day the Irish media was reporting that IBEC were urging the government to cut social welfare payments by 3 percent in its supplementary budget:

“Recent OECD research shows that replacement rates in Ireland are very high by international standards. This and a range of other dimensions of the Irish social welfare system must be fundamentally reappraised in light of the predicted decline in living standards.”(emphasis mine)

Davy, NCB and Goodbody, the three largest Irish stockbroker firms also put out a joint press release calling for the government to cut social welfare payments in the budget.

Having waited quite a while for Sarah’s response I wondered how long it would take me to get information from the Department of Finance myself. Of course, I don’t have any contacts within the department so I called the press office to see if they knew anything about Ireland’s social welfare payments in relation to the EU. The person who answered the phone said he knew nothing of Sarah’s claim, but assumed that if she had made it, and attributed it to the Dept. of Finance then they must have the information. He promised to check and get back to me before the end of the day. Unfortunately, he didn’t.

After making that call, however, I also contacted the press office at the Dept. of Social and Family Affairs and talked to a press officer there. As it happens she had been contacted by a journalist who wanted to know how Irish rates compared to other EU countries, but she said it was John Downes of the Sunday Tribune. She told me what she had told him, to check the MISSOC database, which was set up by the EU Commission to provide a cross country comparison of social welfare protections and benefits.

She emphasized though that it was difficult to make a direct comparison between the different social welfare systems - there are too many variables. A quick search of the database does indicate this difficulty. However, it is not impossible to make some initial comparisons. For example, for a single person in Sweden the maximum amount of dole is €382 per week (80% of earnings up to a maximum of €24,000). In Belgium its €287 per week.  Both of these are not means-tested. In Ireland it was €185 per week which could be means-tested. This seems to confirm the OECD data that Michael mentioned.

As it happens John Downes published a couple of articles (1 & 2) in the Sunday Tribune the following Sunday, the 5^th of April, which was based on a survey the Sunday Tribune conducted.

“Unemployment payments to Ireland’s jobless are well behind several countries in Scandinavia and mainland Europe but significantly more generous than in Northern Ireland and Britain, a Sunday Tribune survey has found.”

[...] the survey also shows that countries with high standards of living such as Sweden reflect that in rates of unemployment benefit which are higher than Ireland’s. The maximum rate of payment in Denmark stands at approximately €472 per week, or almost €1,900 a month. Similarly, the top rate in Germany stands at around €1,800 a month for a single person with children, while in Austria, a single person with no dependents can pull in up to €1,328 a month.

Rates in Spain, Sweden and other countries are also significantly higher than in Ireland. The London Times reported recently that, due to the vagaries of the French system, it is possible to earn up to €6,366.80 a month there, depending on your previous income levels.”

This article by an established journalist confirms what Michael had said, and if it is based on the MISSOC database clearly indicates that there is an independent source other than the OECD tables which prove that Ireland does not have the most generous social welfare payments in the EU (update: I have since found out that it was based on information from a variety of sources). Not only that, it is the data source the Dept. of Social and Family Affairs would use to verify the differences. As an addendum to this, an article in the online edition of the conservative Washington DC based magazine Foreign Policy called ‘the best places to lose your job‘ also confirms the data.

The problem, however, was that the statement that Ireland has the most generous social welfare payments in the EU, remains a highly credible statement in media and political circles.

In the Sunday Business Post in its 5^th of April predictions about the supplementary budget, Nicola Cooke wrote:

“At just over €200, the weekly jobseekers’ allowance for a single person is considered among the most generous in Europe. Last week, Ibec and three of the major stockbrokers in Ireland called for a reduction in social welfare payments because of the predicted 5 per cent drop in consumer prices this year.”

In the Sunday Independent, also on the 5^th, Daniel McConnell used the generous phrase again:

“It is also understood that he will not reduce the generous social welfare payments, but will signal that if prices continue to fall he may look at reducing payment levels in 2010. Social welfare payments in 2009 will total €21bn — by far the biggest drain on Government finances.”

Although the cuts in social welfare payments were not as harsh as expected in the supplementary budget on the 7^th of April, there was an indication from the Minister for Finance that a cut in payments would occur in future budgets. In his budget speech, however, Brian Lenihan did make the same point as Sarah, Turlough, Nicola, Daniel and the triad of stockbrokers:

‘Over the last decade, we have been able to provide very significant increases in welfare payments. For example, the payment of Child Benefit has increased from less than €44 to €166 per month. The State contributory pension has gone from around €113 to more than €230 per week. And the weekly rate of long-term job seekers allowance was raised from €93 to €204. These payments compare very well internationally, particularly with payments in Britain and Northern Ireland.’

So we can see that something that is presented as a fact, but which has been contested on Irish Left Review and shown not to be the case in an article in the Sunday Tribune can still carry weight within the public debate - at the highest level. At this point my understanding with Sarah was that she was still waiting for details from the Dept. of Finance which would substantiate her claim. However, I decided to give her a deadline rather than let it drag on indefinitely. It was important for us to be as fair as possible and to give her every chance to corroborate her claim. Although the Dept. of Finance was no doubt extremely busy in the weeks prior to the April budget it seemed reasonable to expect them to provide an answer to a regular Irish Times columnist within three weeks.

On the 9^th of April, the evening before our deadline, Sarah sent an email telling me that her ‘economics people’ had finally got back to her. She said they had explained that…

“… the OECD tables are extremely problematical - since they are all based on income per capita - median incomes - and minimum and maximum benefits.

So, in Ireland’s case the issue of relative incomes is complicated by GDP per capita not reflecting the real incomes in our economy due to the difference between GDP and GNP.  In the majority of EU member states GDP and GNP are seen as virtually identical.  (Though as Michael acknowledged our wages are lower, so therefore the benefits will be lower too).

On the rates side, there was a report in the Sunday Tribune which illustrated the difficulty of comparison as some were minimum rates and some were maximum rates. (And unfortunately I can’t find that now) As I recall in virtually all of the cases the minimum rate was higher in Ireland than other member states.  Obviously, this is complicated by additional benefits; such as housing, child supplements and benefits, and additional benefits.

As Michael is more familiar with the OECD tables than I am, I asked him if he thought it was accurate that the OECD tables were based on GDP. This is his response:

“The comparison between the actual amounts paid out under different nations’ social welfare programmes has nothing to do with GDP or GNP figures.  If one were comparing the total amount of social protection expenditure in economies then, yes, this would come into play.  But that’s not the case here.  I don’t know why Sarah would even raise this issue.  It’s a diversion.

In addition, she suggested that, because Irish wages are lower, then as a consequence, our benefits would be lower.  This is not the case in Ireland because regardless of wage level, we have a flat-rate Jobseekers’ Benefit / Allowance payment.  We have no pay-related element.  Many EU countries do have pay-related system.  That’s why in their systems you have minimum and maximum payments.  But the beauty of the OECD Benefits and Wages database is that you can compare the amount of benefits people get based on the same wage - which is what I did, using €29,000 for a single person and an average industrial wage of €40,000 for a couple.  Again, Sarah’s point is mere diversion.”

Despite the fact that she provided an explanation which she claimed came from the Dept of Finance to fully substantiate her statement she then went on to say that ‘perhaps’ she had used one misplaced word:

“So let’s say this: Let’s say I acknowledge that perhaps we are not the MOST generous. BUT of all those countries listed above us the OECD table, what are their income tax rates?

My whole point was this (leaving aside ONE misplaced word) (though the lads signing on in the Republic from Northern Ireland are happy enough with our rates)…”

She then goes on to reiterate the points she made in her column, but as Michael’s letter and the request for a response had nothing to do with that there is no need to repeat them here. In the original letter Michael Taft asked her to tell him what the source for the statement was, and to either substantiate the claim in a response that we could publish in the Irish Left Review or to print a correction.

So in her response she has provided the opinion of her ‘economics people’ in the Dept. of Finance, but not any new information that would contest Michael’s findings. Rather the opinion is a highly inaccurate description of how OECD calculates its Wages and Benefits table. It seems barely credible that this was the opinion of anyone with a background in economics in the Dept. of Finance. Moreover, while providing that explanation she concedes that perhaps she misspoke when claiming that Ireland had the MOST generous social welfare payments in the EU.

However, to mitigate this she insists that her statement was connected to both the rates in Northern Ireland and the UK and the rates of tax in other countries where social welfare payments are higher although neither point was mentioned in her column.

As it turns out I finally got in touch with someone in the Dept of Finance’s press office. Jackie, a press officer in the Department kindly tracked down an accurate source of information which would tell me how Irish social welfare payments compared to those in other EU countries. She said all I had to do was type ‘MISSOC.org’ into Google and I should be able to find the EU Commission database which is used to compare social protection systems in countries all around the world. When I asked her if this is what Sarah Carey would have been told if she wanted to know this information she said she presumed so. All Jackie had done was phone the Dept of Social and Family Affairs. After all, they know more about social welfare payments than the Dept of Finance do - and it only took her half an hour.